Mazak Bounces with U.S. Rebound

Northern Kentucky machine tool maker’s order book is exploding with U.S. manufacturing revival

By Greg Paeth

A worker assembles some of the Mazak’s 200 varieties of machine tool products. The Florence-based company sells its “mother machines” to the manufacturing sector, which uses them to create parts that are assembled into final products.

Some motorists might scratch their heads and wonder what’s going on at the intersection of Industrial Road and Foundation Drive in Florence.

Buildings on three of the four corners (the fourth is grass and trees) are emblazoned with the bright orange logo of Mazak, the Japanese-owned machine tool maker that is one of the dominant players in an industry once dominated by U.S. companies – many of which were based some 20 miles north in Cincinnati.

Today Mazak, the first Japanese-owned company to actually make a product in Kentucky, is deeply immersed in its 15th expansion since the company opened its doors in the commonwealth with about 35 employees in 1974.

It’s a big turnaround from the dark days of 2008-09 when the machine tool business was on life support with the global recession hammering hundreds of industries. Since then, though, the number of orders for machine tools has exploded, two shifts are operating, employment hovers around 750 and the company is adding another 200,000 s.f. to its “Florence campus.”

Machine tool orders often are considered a crucial indicator of the health of the manufacturing sector. Businesses buy new equipment when they’re optimistic about increasing production. Purchases plummet when the outlook is gloomy.

“We could see the industrial economy coming up faster than what everybody was talking about with the economy as a whole,” said Brian Papke, president of the Mazak Corp. in North America. “We could actually see that because we were working with all of these industries.”

The Florence campus includes the company’s North American headquarters, its National Technology Center, the National Parts Center and its only manufacturing facility in the U.S. – where it has nine other offices in cities that span the country from New York to California. Including 275 who were added in the last 18 months, Mazak has about 1,050 employees in the U.S. and about 7,000 worldwide in North and South America, Europe and Asia, Papke said.

“I don’t think we’re a little Kentucky company anymore,” Papke said with a smile. The campus in Northern Kentucky will have 800,000 s.f. under roof once the current expansion is completed, he said.

But the mood at Mazak was far different just four years ago, when orders were off by 60 percent and the Florence plant had to cut jobs because it was making only 30 to 35 machines each month.

“It was a disastrous time for us, maybe the worst time ever,” Papke said. However, the company experienced a stunning rebound in 2010 when orders increased 110 percent and grew by another 60 percent last year.

“Today we’re making 900 machines worldwide per month, and about 140 of those are in Kentucky. In machine tools, that’s a big number,” he said.

Mazak machinery is a big-ticket item for most companies. Prices for the approximately 100 models made in Florence range from $75,000 to more than $1 million.

Machine tools: manufacturing’s building blocks

Mazak’s machine tools – which include some 200 different models worldwide – are often described as “mother machines,” highly sophisticated, computer-driven devices that make the parts that are assembled to make other machines. The resulting machines then create everything from the molds that produce a smart phone case or an artificial hip to the landing gear of a Boeing jetliner or the steel frame of a Caterpillar earthmover.

Today, Mazak equipment – much of it designed for metal cutting – is used in thousands of manufacturing processes, including the auto and truck industries; construction, farm and medical equipment; and in the aerospace, defense, oil and energy industries. Defense contractors and the oil and energy industries are some of the biggest customers.

At a time when national security is a critical issue, Papke said Mazak is cautious about how its tools are used. The company has programmed each machine to shut down automatically if it’s moved from its original installation site. It can’t be restarted without a password provided by Mazak.

“We watch very closely where they are going. We have to get export licenses on those machines and, depending upon where they are going, that might be difficult sometimes,” Papke said. “On some parts, we have to verify the application and have the management of the company sign off that the parts will not be used for weapons systems, for instance. We want to make sure the machines don’t get in the wrong hands.”

Mazak contends one of its competitive advantages is what it calls “production on demand,” a lean manufacturing concept that calls for the company to build a machine only when it’s ordered, not because of a sales forecast. The company prides itself on being able to build machines quickly, stressed Papke and George Yamane, marketing manager.

“If everything is in order, we can build most turning machines in three weeks,” Yamane said.

A major asset for Kentucky

Since opening its doors in Florence, the machine tool company has established itself as a valuable tool in the process of selling Kentucky to other manufacturers who are hunting for plant sites.

During their most recent trade mission to Asia in mid-May, Gov. Steve Beshear and Larry Hayes, secretary of the Cabinet for Economic Development, met with a Yamazaki Mazak executive in Tokyo, Hayes said.

“Their reputation in advanced manufacturing for the quality of the work that they do and the quality of their machinery is so well known that when a company is looking for a place to do advanced manufacturing, we use them as a qualifier for the workforce that we have in Kentucky,” Hayes said. “That verifies us as someplace where you can find that skill set.”

“Ever since they began operating in Northern Kentucky, they certainly have led the way with other international firms who were looking at Mazak and seeing that they have been successful in Northern Kentucky,” said Dan Tobergte, president/CEO of the Tri-County Economic Development Corp., an agency created to attract business investment and jobs to Boone, Campbell and Kenton counties. A tour of Mazak’s high-tech plant and technical center, and meeting with Mazak executives oftentimes are elements of a Tri-ED sales pitch, Tobergte said.

“No other company in the area can bring in 2,000 suppliers, vendors and customers every year” to showcase both the company and the region, Tobergte said.

Papke said he saw plenty of evidence that the U.S. economy is rebounding last October when the company held a “Discover Mazak” event in Florence that attracted 2,500 manufacturers over a two-week period for what the company called T3: Tomorrow’s Technology Today.

“We have some events that are very significant in our industry and for manufacturing as a whole,” Papke said. “For T3 we expected 1,500 people and had 2,500 attend. It was a huge success, and it just skyrocketed our business. …

“We’re really entering a stage now where some of the machines we’re literally designing, and we are the only ones that will make those machines,” he said. “Before, they might be made in Japan and Europe and here, but now we may be the only plant to make that product in the world. That brings the export activities up to a much higher level.”

Papke, a 40-year veteran of the industry, said Mazak decided to build its manufacturing plant just outside Cincinnati for a variety of reasons but especially because of that city’s prominence as the home to some of the most respected machine tool makers in the world.

“They were the dream. Our chairman (Yamazaki) idolized them,” Papke said, rattling off the names of Cincinnati Milacron, Lodge & Shipley, LeBlond Machine Tool and other companies that were known worldwide for quality and innovation. “For him, as a young man in Japan, he looked at these American machine tool companies and just admired them as almost a dream. (And he would ask) ‘Could we ever be anything like them?’”

Capital of the world’s machine tool industry

Yamazaki’s reverence for the U.S. machine tool industry wasn’t the only reason the company located in Kentucky. The company believed it could attract skilled labor in an area that had a wealth of machine tool workers as well as college graduates, Papke said. Proximity to a major airport also was an important factor.

“If you drew a circle around Cincinnati at the time and went out about 300 miles, it (the Florence location) was very central to the industrial base of this country,” said Papke, who was recruited in 1987 from one of Mazak’s rivals, White Consolidated Industries, which was making machine tools in Cincinnati at the time.

“At the time they opened in Florence, Cincinnati was the undisputed capital of the worldwide machine tool industry,” said Joe Jablonowski, editor of Metalworking Insiders’ Report, a well respected Larchmont, N.Y.-based publication that focuses on the machine tool industry.

“When Mazak started (in Florence) in 1974, the U.S. was No. 1 in the world (in production) and it stood head and shoulders above the next country,” Jablonowski said. “When he (Yamazaki) opened and began manufacturing machine tools just across the river from Cincinnati, it was seen by some as quite cheeky.”

A 2012 survey by Metalworking Insiders’ Report ranks China and its booming economy as both the No. 1 producer of machine tools ($28.3 billion) as well as the No. 1 consumer of machine tools ($39 billion). The United States, whose figures include Mazak in Florence, ranks seventh in production ($4.2 billion) and fourth in consumption ($6.6 billion).

Long before many people began talking about “globalization,” Jablonowski said, Yamazaki and Mazak had adopted a global manufacturing strategy that created a company that is among the top five toolmakers in the world.

The privately held company rarely releases any financial data, which requires analysts to estimate its production, revenues and profits. For 2009, during the recession, the company said worldwide sales totaled $2.5 billion.

Papke stressed that he doesn’t devote much time to debating which machine tool maker is the largest.

“It’s not worth arguing about. Generally speaking, we’re the largest machine tool company in the world,” said Papke, stressing though that the company would always prefer “…to be known as the best machine tool company.”